On Mar 24, we issued an updated research report on AGCO Corporation AGCO. The company is poised to benefit from increased investments, engineering spend, focus on product development and cost-reduction efforts. However, weak industry demand for farm equipment, decline in farm income and higher income tax remain headwinds.
AGCO intends to increase its investment to execute the product development plans, resulting in increased capital expenditure and engineering spend in 2017. Its spending plan in 2017 will support long-term growth of business. In addition, as a result of the solid free cash flow which AGCO generated over the last few years, its balance sheet and liquidity position remain strong.
Furthermore, AGCO will continue to make long-term investment to raise the efficiency of factories, improve service levels and strengthen product offering. The company remains focused on cost and expense reduction through globalizing processes, reducing complexity and better leveraging scale.
However, deteriorating farm economics have affected farmers’ sentiments and the company experienced lower industry equipment demand in all major markets. Sales of high horsepower tractors, combines, sprayers and grain storage, and handling equipment remained well below 2016. Hence, the company projects a modest decline in production in 2017 as compared with 2016.
The USDA estimates farm income to remain challenging in 2017 in the U.S. With the estimated decline in equipment demand, the large agricultural equipment sector in North America is expected to be down. Lastly, AGCO also anticipates a moderate decline in the Western European market.
AGCO currently carries a Zacks Rank #3 (Hold).
Share Price Performance
In the last one year, AGCO has outperformed the Zacks classified Machinery Farm sub-industry with respect to price performance. The stock gained around 23.2%, while the industry rose 21.3% over the same time frame.
Stocks to Consider
Some better-ranked stocks in the sector include ACCO Brands Corp. ACCO, Brady Corp. BRC and Casella Waste Systems, Inc. CWST. All of these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ACCO Brands Corporation has an earnings ESP of +24.74% for the trailing four quarters. Brady Corporation has an impressive average earnings surprise of 20.84% for the last four quarters, while Casella Waste has a remarkable average earnings surprise of 165.21% for the past four quarters.
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AGCO Corporation (AGCO): Free Stock Analysis Report
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